That 2021 Social Security cost of living adjustment (COLA) increase of 1.3% isn’t keeping up with real-world cost of living increases, according to a recent survey from The Senior Citizens League.
The survey of retirees found that 63% say the 1.3% COLA raised their net monthly Social Security benefit by less than $15 after the deduction for the Medicare Part B premium.
The 1.3% increase bumped the average monthly benefit for all retired workers just $20, from $1,523 in 2020 to $1,543 in 2021. That equates to about an extra $240 per year.
Meanwhile, 65% of survey respondents report their monthly household expenses in 2020 rose by more than $80, including 40% who reported their expenses are up by $120 per month or more.
Consumer price index data through February showed a big jump in some prices and suggests that the next Social Security COLA may in fact be much higher—the highest since 2019 when the COLA was 2.8%.
“But right now, those higher prices erode the buying power of Social Security benefits,” said Mary Johnson, who studies the impact that rising prices have on the purchasing power of Social Security recipients.
According to research by Johnson, from January 2000 to January 2020, Social Security benefits have already lost 30% of buying power.
“The current inflationary trend may only be temporary, because prices today are compared with a big sudden drop in prices a year ago when the impact of COVID-19 first began to hit our economy,” Johnson added. “The jump we see now is centered primarily on energy prices, but a number of other spending categories have stayed relatively flat.”
There is one trend that of particular concern for all consumers. “There’s a relentless march upward in the cost of foods, especially sources of protein, (meats, poultry, seafood), dairy, as well as fruits and vegetables,” Johnson said. Some categories of food prices especially for fresh fruits and vegetables have climbed in recent years due to widespread damage from severe weather and wildfires.
“COVID-19 simply added another layer of disaster cost due to loss of restaurant and school lunch markets, labor shortages for growing, harvesting and food processing, and transportation disruptions,” Johnson said. “This is the year to plant a vegetable garden.”
TSCL added that the $1,400 stimulus checks will help millions of retirees to cope at a time when Social Security checks don’t buy as much due to low COLAs while food and energy costs are climbing. The nonpartisan senior advocacy group supports boosting Social Security benefits and tying the annual COLA to a consumer price index that more closely reflects the spending patterns of older Americans.
Approximately 70 million Americans received the 1.3% increase in their Social Security benefits in 2021. Social Security benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The CPI-W rises when inflation increases, leading to a higher cost-of-living. This change means prices for goods and services, on average, are a little more expensive, so the cost-of-living adjustment (COLA) helps to offset these costs.
TSCL wants the annual COLA inflation tether to be tied to the CPI-E (Consumer Price Index for the Elderly), an experimental index that specifically tracks the spending of households with persons aged 62 and over.
President Joe Biden has also said he would like to switch the inflationary tether to the CPI-E, which TSCL research has shown would result in slightly bigger (about .25%) annual COLAs than under the CPI-W.
SSA adds fact sheet to statements
In other news, the Social Security Administration announced it has added new fact sheets to accompany online mySocial Security statements, which tell beneficiaries how much they or their families can expect to receive in disability, survivor, and retirement benefits.
“These new fact sheets provide clarity and useful information, based on your age group and earnings situation. They can also help you better understand Social Security programs and benefits,” said Darlynda Bogle, Social Security administration assistant deputy commissioner, in an April 1 blog post on Social Security Matters.
The new statement fact sheets cover the following topics:
- Retirement readiness for workers in four different age groups.
- Workers with non-covered earnings who may be subject to the Windfall Elimination Provision and Government Pension Offset.
- Social Security basics for new workers.
- How people become eligible for benefits (for workers not fully insured).
- How additional work can increase future benefits.
- Medicare readiness for workers age 62 and up.
SEE ALSO:
- Social Security 2021: What Will and What Might Happen
- Biden Backs This Change for Social Security COLA
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
